Asian Currencies Post Weekly Drop as Global Recession Deepens

By Kim Kyoungwha and Lilian Karunungan

Jan. 17 (Bloomberg) -- Asian currencies fell this week, pushing a regional benchmark to a one-month low, as a deepening global economic slump prompted investors cut their holdings of riskier assets.

Malaysia’s ringgit, the South Korean won and India’s rupee all slumped about 1 percent as reports showed U.S. retail sales dropped for a sixth month in December and China’s exports fell the most in a decade. The MSCI Asia Pacific Index of shares lost 5.7 percent, the biggest weekly slide since Nov. 21, as Japan announced the largest decline in machinery orders on record.

“Doubts and fears on whether policy measures will work to shore up the economy are growing,” said Kim Jae Eun, an economist with Hana Daetoo Securities Co. in Seoul. “That keeps seeping through to currency and stock markets.”

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, slid 0.4 percent this week to 105.56. It touched a one-month low of 103.79 on Jan. 12. The ringgit dropped 1 percent to 3.5765 per dollar, the won declined 1.1 percent to 1,358 and the rupee lost 1.1 percent to 48.7975.

China, South Korea and Singapore are due to report fourth- quarter economic growth next week, while the Bank of Japan and Malaysia’s central bank meet on interest rates. China’s economy probably expanded at the slowest pace in seven years, while Singapore’s contracted, according to economists surveyed by Bloomberg News. A quarter-point rate cut is forecast in Malaysia.

‘Not Finished’

China’s exports fell 2.8 percent in December from a year ago and Japanese machinery orders in November dropped 16 percent, according to data released this week. Singapore’s shipments plunged 20.8 percent last month, the most since early 2002, and U.S. retail sales slid 2.7 percent from November.

The rupiah fell as foreign investors sold more Indonesian stocks than they bought in three of the last four trading days. Indonesia said this week it will more than double its budget deficit target to 2.5 percent of GDP to bolster economic growth.

“The global financial crisis is not yet finished,” said Rully Nova, a currency trader at PT Bank Himpunan Saudara in Jakarta. “It’s not good for the rupiah.”

Malaysia’s currency slid for a second week ahead of the central bank meeting on Jan. 21, at which economists surveyed by Bloomberg predict the benchmark interest rate will be reduced to 3 percent. Malaysia is working on a second fiscal stimulus program after announcing a 7 billion ringgit ($1.9 billion) package in November, Second Finance Minister Nor Mohamed Yakcop said last week.

“The ringgit could benefit from any knee-jerk reaction to fiscal stimulus or rate-cut efforts,” said Joanna Tan, a regional economist at Forecast Pte in Singapore. “But we think sentiment is still fragile and there’s further downside to the ringgit and economic growth outlook.”

Exports, Recession

Malaysia’s exports dropped 4.9 percent from a year earlier in November, the biggest drop since 2002. Singapore, the U.S. and Japan, which together accounted for 38 percent of Malaysia’s overseas sales in 2008, are all in the midst of recessions.

Singapore’s dollar fell 0.5 percent this week to S$1.4868 against the greenback. The economy contracted 1.7 percent in the fourth quarter from the previous three months, a Bloomberg survey showed before next week’s data.

Elsewhere, Taiwan’s dollar declined 0.6 percent this week to NT$33.36 versus the U.S. currency. The Thai baht fell 0.2 percent to 34.89 and the Philippine peso slipped 0.1 percent to 47.205. The Vietnamese dong and China’s yuan were both little changed at 17,478.50 and 6.8374 respectively.

To contact the reporters on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net; Lilian Karunungan in Singapore at lkarunungan@bloomberg.net.